Friday 23 September 2011 12.44 EDT
First published on Friday 23 September 2011 12.44 EDT

The terrace at the House of Lords juts out over the river Thames like a ship. As a newly-made peer, it was Lord Glasman's new favourite space. Out in the open air, it allowed him to smoke freely. His self-designated table sat closest to the water, and became littered with his signature possessions: a blue and orange packet of Old Holborn tobacco, a lighter, a pair of glasses, empty coffee cups and his pair of mobile phones.

Glasman's friends and visitors used to come to Bar Italia in Soho to sit outside and talk to the little-known academic while he smoked. Now Lord Glasman [he was ennobled earlier this year] would see his visitors here.

Glasman might have had an unconventional background for a lord, but anyone who went to visit him in Westminster acknowledged he was now in his element. In his eyes the Lords was a place of virtue and tradition, perfectly suited to his Blue Labour philosophy. He had an emotional connection with the place. His mum would have been proud.

Looking back on the call when Stewart Wood [Ed Miliband's closest aide] first told him about the honour, Glasman's surprise and delight is still palpable: "First of all I had no idea really what it meant, it was genuinely outside my experience. I remember saying something really stupid like, 'You have to give me a few days to talk to my people', and Stewart saying, 'You have 45 minutes; we only had the idea last night and the closure date is today at 5.30pm'. I think it was a last-minute thought."

On a very practical level, Glasman's ascension transformed his daily life by providing him with a new source of income. For some time the family's financial situation had been deteriorating. Three weeks before he was offered a place in the Lords, Glasman's wife, Catherine, applied for a job at Morrisons to make ends meet and never got a reply. It got to the point, Glasman said, where it was getting difficult to meet costs for food. By taking up the peerage, he could claim £300 every time he sat in the chamber.

It was an offer he couldn't refuse: "We had no money and we had another child, so we had four children in one bedroom. We had to borrow money, and there were some months we had none. I kept saying we can't be dominated by money, but the no food issue is tricky – we were living off carrots; the coffee-and-cigarette diet is quite longstanding at home."

Overnight, Glasman's cash flow problems were over. He was able to take his family on their first proper holiday. His 10-year-old daughter Annie could now have her own room instead of sharing with her three brothers. With the new money that was coming in – combined with a new teaching grant he'd received – Glasman was able to build an entire new level on his flat in Hackney.

For his wife, who had worked her whole life to support others, it was a huge recognition to be made a lady. Glasman said she had been a massive supporter of the Blue Labour project from the beginning, supporting her husband's community organising when it took up precious time without bringing in much-needed income. The whole family, Glasman said, felt "honoured" by Ed Miliband's decision.

The political consequences were also transformational. By elevating Glasman to the Lords, Miliband was giving credibility to a whole new set of ideas and values that he embodied. The fact that Miliband was seen to have chosen Glasman was also very important to the media. From now on, when Glasman said something it would be linked directly to the head of the party, and he was often referred to as "Ed's policy adviser" or "political guru". At a time when journalists were anxious to define the new – and slightly unexpected – leader of the opposition, Glasman provided a rather intriguing and colourful set of clues.

The press pored over his every word, and very quickly Glasman's friends at Portcullis House (a loose group of supporters and intellectuals around Blue Labour) found they were tied to comments they not only couldn't control, but often vehemently disagreed with.

Glasman's first big controversy came in April when the Daily Mail ran an interview with him on immigration. Running next to a large picture of Ed Miliband, the Mail reported quotes from Glasman that suggested Labour had "lied" on immigration.

Less than a week later, an interview for Progress – which represents Labour's more Blairite wing – produced another ripple of discontent throughout the ranks. This time Glasman asserted that Labour should talk to the far-right group the English Defence League. The party's stance on the EDL had always been one of active disassociation, and many high-profile Labour members, including Jon Cruddas, were involved in campaigning to brand the organisation as racist and make sure it was given no platform.

Events came to a head when Glasman made the front page of the Daily Telegraph with comments that would have caused controversy in the Conservative party, let alone Labour: "Britain is not an outpost of the UN. We have to put the people in this country first."

The interviewer, Mary Riddell, asked if that meant stopping immigration completely for a period: "Yes. I would add that we should be more generous and friendly in receiving those [few] who are needed. To be more generous, we have to draw the line."

Riddell then asked Glasman if he had any sympathy with Iain Duncan Smith's controversial call for British jobs for British workers: "Completely. The people who live here are the highest priority. We've got to listen and be with them. They're in the right place – it's us who are not."

This was a real existential threat to Blue Labour, and Glasman knew it. He openly acknowledged that he had "really fucked up". He stopped checking his emails and refrained from typing his name into Google "for sheer mental health reasons". Although the project had been more than one man and a brand, it was now threatening to become just that.

But an obituary for Blue Labour would seem premature. When Glasman returned from holiday he made peace with his alliances. Although one of the most angry at Glasman, Cruddas said he was still prepared to be associated with the label. The relationships with Ed Miliband's office remained intact. Later it emerged that throughout the summer, Glasman was attending meetings in Portcullis House with Miliband and his senior leadership team.

The Labour leader seemed surprisingly understanding and sympathetic to his newly chosen peer. In marked contrast to Gordon Brown's leadership style, Miliband acknowledged that moving into public life was a "difficult journey" for anyone.

"I think Maurice is a very important voice for bringing new issues to the table," Miliband said. "I don't agree with lots of what he says – he doesn't agree with some of what he said, as far as I can tell! But Maurice is not a politician, he's someone who I thought had something interesting to say about the future of the Labour party … and it's my approach to give some intellectual space for some people. For a long time, people felt there was a line and you had to toe the line and there wasn't any space to deviate from that line; this is about saying actually there is space for debate."

Sitting in his office in Portcullis House, Ed Miliband spoke warmly about Blue Labour and its proponents. He may not publicly attach himself to the label, but he is unashamedly enthusiastic about the ideas and language that underpin it: "I think that actually [it's] ahead of its time in a way. Blue Labour was saying to us, you have to think about the values that your society operates under – it's not just always about how can you get a bit more money for the health service, or getting more money into education, it's also something bigger. The institutions we have and the way they are run speak to a set of values."

The same day that Ed Miliband was speaking in early September 2011, his brother David also agreed to be interviewed. It was almost exactly a year since he had lost the leadership election to his younger brother, and the feelings were still raw. But when asked what lessons the party could take from a set of seminars widely associated with the founding of Blue Labour ideas, David Miliband offered an uncanny echo of his brother. "We shouldn't lose the fundamental insight that globalisation and social change can corrode relationships of trust," he said. "Politics is about rebuilding those relationships."

Extracted from Tangled up in Blue: Blue Labour and the Struggle for Labour's Soul, by Rowenna Davis, to be published by Ruskin Publishing at £8.99 on 13 October. Advance signed copies available now exclusively at www.tangledupinblue.co.uk

Labour's true colours?

Blue Labour

The concept of Blue Labour hit Maurice Glasman "like a bolt of lightning" in the emotional turmoil following his mother's death in 2008. Labour was suffering under Gordon Brown's leadership in the face of the financial crisis, and Glasman – a not particularly successful academic at London Metropolitan University – thought the then prime minister was betraying voters like his mother.

The project wants the party to reconnect with people, particularly the 4 million working-class voters it has lost since 1997. Its primary call on Ed Miliband is to take on the free market. It believes the party should not stand by when the market starts trampling on things that offer people meaning, particularly friendship, family and dignity in work.

But Blue Labour also calls on the party to change the way it "does" the state, which proponents believe has left people disempowered and lonely. Rather than giving a single mother housing benefit, Blue Labour is more likely to give her a stake in a community land trust.

Purple Labour

Purple Labour, outlined last week by a group of Labour frontbenchers including Douglas Alexander and Blairite big beasts such as Peter Mandelson, confesses that the financial crash has made Labour's complicity with globalised capitalism look mistaken.

Decentralise the economy, say the authors of The Purple Book; mutualise some major banks, elect mayors in six big cities and hand councils tax raising powers. Tristram Hunt MP wants more co-operative ownership; Jacqui Smith suggests crime victims should be able to suggest sentences; Alan Milburn says parents at consistently failing schools should be able to move their children to an alternative school with an education credit worth 150% of the cost of the original schooling.

"The global financial system has left Labour looking like it had confused good times with a good system," said Alexander. He said voters would only trust Labour in 2015 if it showed it would balance the public finances and make state spending efficient. This is no ginger group. The foreword to The Purple Book was penned by the leader, Ed Miliband.